The Lost Prescription for Saving Boeing

January 6, 2020 • ILE LAB • Boaz Tamir

If he wants to save Boeing, David Calhoun, the new CEO, will have to first find, then air out, and then make use of the map that Alan Mulally had drawn.

One day after the 9/11 2001 attacks, sales at Boeing were crashing under the weight of a flood of cancelled deals and holds on more than 50% of backlog orders.  The struggle against Airbus (the European airplane manufacturer) had made the situation even worse.  Boeing’s board was facing an existential crisis that left it with few options. The development and manufacture systems had to be redesigned.

When facing a severe situation, most institutions tend to reconstruct, and the overwhelming majority of boards and directorates automatically switch the system into emergency mode and instinctually (together with hysterics) cut back on resources for manufacturing, close down research and development projects and cancel their marketing budgets. At the top of their operation excellence and restructuring programs, they impose an across-the-board labor cut and shut down contracts with their suppliers.

Alan Mulally, who had taken on the role of director of the civilian-commercial flight department at Boeing only some months before the crisis broke out, dealt with the situation by adopting a Lean approach to management. Mulally’s way of coping stands in stark contrast to distorted interpretations (proffered by supporters of traditional management) that view “Lean & mean” diet as the basis for coping with a drop in demand and heightened competition.

Before he did anything, Mulally defined his purpose – relating to the question, Why?  According to Mulally, Boeing’s purpose is “to shrink distances in the global village… where people and cultures could get to know each other and work together to solve their common problems.”  Mulally understood that dictating a plan for cutbacks from above would not provide an out but would rather increase the sense of panic, loss of trust, and internal disintegration.  In contrast, a trustworthy purpose would enlist of the stakeholders to join hands to bring that purpose to fruition.

With a leader’s cool, in the midst of the crisis, Mulally clearly articulated his vision of “working together” and designed a culture based on transparent team work across the length and breadth of the organization.  Together with representatives of the trade union, The International Association of Machinists, Mulally viewed all the workers as senior partners, and he brokered a long-term partnership with his suppliers.

Instead of cancelling research and development plans, Mulally accelerated the pace of the development of the Boeing 777, based on the LPPD framework adopted by Toyota.  The 777 model, which provided significant leverage for saving Boeing, remains the most trustworthy and profitable model ever developed by the civilian aircraft industry.

At the end of 2006, five years after Alan Mulally put Boeing’s civilian air travel devision back on the runway, he was enlisted to deal with the an even more severe crisis, this time in the automobile industry at Ford, which had lost more than 17 billion dollars that year.  There, too, he has adopted the principles of Lean management — and with even greater determination, given his experience that Boeing.  While his American competitors, General Motors and Chrysler, continued to use traditional management mindset and went bankrupt in 2008, under Mulally’s leadership, Ford crossed over the crisis during the first decade of the 21st century, has come back to profitability, and has become the most significant and challenging competitor to the world’s most profitable and successful automobile company – Toyota.

The circumstances surrounding Boeing’s decline under the leadership of outgoing CEO Dennis Muilenburg relate to issues of safety and loss of customer trust.  However, as with the Volkswagen crisis, the leadership of Boeing over the past few years has been over-confident and employed a hierarchical, centralized management culture that discourages critical thinking, lacks transparency, and leads to poor team work.

David Calhoun, who is assuming his position as Boeing CEO at the beginning of January, 2020, is facing an extraordinary managerial challenge.  He must have the ability to act deliberately during a crisis, and refrain from giving in to instinctive solutions such as the traditional yet poisonous “organization restructuring” plan.  Boeing is suffering from a severe crisis of trust with its customers, and Calhoun has to beware of disastrous plans that could lead to the company’s demise.  Before he damages the workers’ and suppliers’ trust, he had better look through Boeing’s archives and air out the map that Mullaly drew, in order to bring the airplane manufacturer back onto the runway, so that, maybe, it will even be able to take off again.

 Boaz Tamir, ILE.

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